Collective bargaining is a mechanism that allows competing businesses (typically small businesses) to band together to improve their commercial leverage in negotiating business agreements with their suppliers and/or customers.
Such practice has been viewed with some caution in Australia given the potential for unintended adverse impacts on market competition but have been previously permitted where the businesses have applied for (and received) a legal exemption from the Australian Competition and Consumer Commission.
Last year, the ACCC consulted with on a proposal to develop a ‘class exemption’ that would provide legal protection for competing businesses to collectively bargain with customers or suppliers, without having to apply to the ACCC.
Significantly, this work was undertaken in tandem with a review of Unfair Contract Laws and the investigation of the Joint Parliamentary Committee into the Operation and effectiveness of the Franchise Code of Conduct (and the Oil Code of Conduct).
“In effect, all three of these investigations comprise one of the most significant reviews of laws governing business to business relationships in Australia in more than three decades”, said ACAPMA CEO Mark McKenzie
The ACCC proposal followed an extensive review of the existing exemption mechanism by the ACCC and included a discussion with members of the ACCC’s Small Business and Franchising Consultative Committee in November 2018 – a committee that includes ACAPMA representation.
“Our position was that there was considerable merit in increasing the opportunity for small fuel retail businesses to band together to source the best possible wholesale price for fuel and other services”, said Mark
The ACCC has now issued a preliminary decision on the class exemption. This decision proposes that collective bargaining be automatically permitted (i.e. without the parties being required to make application to the ACCC) in the following circumstances:
- businesses with less than $10 million aggregated annual turnover to collectively bargain with customers or suppliers
- franchisees who have franchise agreements with a particular franchisor to collectively bargain with that franchisor, regardless of their aggregated turnover
- fuel retailers who have a fuel reselling agreement with a particular fuel wholesaler and who operate under the same system or marketing plan to collectively bargain with that fuel wholesaler, regardless of their aggregated turnover.
“The specific inclusion of fuel retailers earning more than $10M in the class exemption is a welcome development as it provides recognition of the fact that much of the revenue collected by fuel retail businesses is immediately returned to the Australian Government in the form of federal fuel excise and GST – and is not actually ‘earned’ by the business, said Mark
Importantly, the new class exemption comes with two significant caveats. First, the new laws do not oblige a fuel wholesaler to negotiate with a bargaining group comprising fuel retailers. Rather, the bargaining group would need to negotiate within a commercial context where both parties would retain the right to exit the negotiations at any point – as occurs in any normal business negotiation.
Second, the new ruling does not override any legal or contractual obligations that exist between the parties, including provisions such as confidentiality clauses.
The ACCC is now seeking stakeholder comment on the proposed new laws, particularly in respect of the following:
- the eligibility criteria
- the one-page notice that groups must provide to the ACCC and the target
- the plain English guidance note for using the class exemption
- the draft legislative instrument, which is the legal document that will create the class exemption.
Comments close on 3 July 2019 and details of the above elements can be found at: https://www.accc.gov.au/public-registers/class-exemptions-register/collective-bargaining-class-exemption
“The proposed new laws are a significant development for our industry and has the potential to put smaller fuel retailers (i.e. dealers and commission agents) into a stronger negotiating position with respect to the future negotiation of fuel supply contracts”, said Mark.
“Further, the absence of the annual revenue cap for our industry means that this mechanism is available to medium and larger multi-site businesses although many of these are already likely to have strong negotiating positions as a result of their purchase of large annual wholesale fuel volumes” added Mark ACAPMA will be preparing a submission to this consultation and is happy to receive input from members up to COB on Friday 28 June 2019. Feedback can be provided by calling the ACAPMA Secretariat on 1300 160 270 or by emailing email@example.com